Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are $14,880$ for the Sleepeze, $12,140$ for the Plushette, and $5,320$ for the Ultima. Gene Dixon, vice president of sales, has provided the following information:a$.$ Salaries for his office $($including himself at $$67,900,$ a marketing research assistant at $$37,800,$ and an administrative assistant at $$25,850)$ are budgeted for $$131,550$ next year.

b$.$ Depreciation on the offices and equipment is $$22,300$ per year.

c$.$ Office supplies and other expenses total $$23,500$ per year

e$.$ Commissions on the Sleepeze and Plushette lines are $4$ percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores.

f$.$ Last year, shipping for the Sleepeze and Plushette lines averaged $$45$ per unit sold. Gene expects the Ultima line to ship for $$80$ per unit sold since this model features a larger mattress.

Suppose that Gene is considering three sales scenarios as follows:

Suppose Gene determines that next year's Sales Division activities include the following:

Research$-$researching current and future conditions in the industry

Shipping$-$arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors

Jobbers$-$coordinating the efforts of the independent jobbers who sell the mattresses

Basic ads$-$placing print and television ads for the Sleepeze and Plushette lines

Ultima ads$-$choosing and working with the advertising agency on the Ultima account

Office management$-$operating the Sales Division office

The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table:

a$.$ Depreciation on the office equipment belongs to the office management activity.

office supplies and costs are assigned to the office management activity.

Required:

Prepare an activity$-$based budget for next year b

$$

Salaries for his office $($including himself at $$67,900,$ a marketing research assistant at $$37,800,$ and an administrative assistant at $$25,850)$ are budgeted for $$131,550$ next year.

Depreciation on the offices and equipment is $$22,300$ per year.

Office supplies and other expenses total $$23,500$ per year.

Advertising has been steady at $$22,250$ per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high$-$end mattress. Gene believes the company should spend $10$ percent of first$-$year Ultima sales for a print and television campaign.

Commissions on the Sleepeze and Plushette lines are $4$ percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores.

Last year, shipping for the Sleepeze and Plushette lines averaged $$45$ per unit sold. Gene expects the Ultima line to ship for $$80$ per unit sold since this model features a larger mattress.

Suppose that Gene is considering three sales scenarios as follows:

Pessimistic Expected Optimistic

Price Quantity Price Quantity Price Quantity

Sleepeze $$18512,960$ $$20414,880$ $$20418,360$

Plushette $30610,01035912,14036914,580$

Ultima $9402,0301,0305,3201,2405,320$

Suppose Gene determines that next year's Sales Division activities include the following:

Research$$researching current and future conditions in the industry

Shipping$$arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors

Jobbers$$coordinating the efforts of the independent jobbers who sell the mattresses

Basic ads$$placing print and television ads for the Sleepeze and Plushette lines

Ultima ads$$choosing and working with the advertising agency on the Ultima account

Office management$$operating the Sales Division office

The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table:

Gene Research

Assistant Administrative

Assistant

Research $-70\%-$

Shipping $30\%-25\%$

Jobbers $151515$

Basic ads $-1530$

Ultima ads $30-5$

Office management $25-25$

Additional information is as follows:

Depreciation on the office equipment belongs to the office management activity.

Of the $$23,500$ for office supplies and other expenses, $$5,100$ can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $$2,000$ per year is attributable to Internet connections and fees, and the bulk of these costs $(85$ percent$)$ are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity.